The Greek Crisis

Wednesday, December 5, 2018

Months before Greece’s next elections, Kyriakos Mitsotakis — the favourite to become prime minister — is already in campaign mode.

He and his shadow cabinet are out on the stump each weekend, fired up by a recent opinion poll giving Mr Mitsotakis’s centre-right New Democracy party a record 16-point lead over the ruling leftwing Syriza party of prime minister Alexis Tsipras.

Speaking to teachers and university professors at an interactive museum in a rundown district of Athens last month, his subject was Greece’s ailing education system.

“We cannot achieve strong growth rates unless we invest in our human capital,” said Mr Mitsotakis — educated at Harvard and Stanford universities — as he and Niki Kerameos, the shadow education minister, outlined plans for better IT teaching, university courses taught in English and a strict timetable for completing degrees.

Thursday, November 29, 2018

Greece has quietly postponed a landmark bond sale after the prolonged sell-off in Italy’s bond market pushed up its cost of raising new debt.

The nation’s leftwing Syriza government had hoped to issue a benchmark 10-year bond within a few weeks of the country’s exit from its €86bn third bailout in August, as a signal to investors that Greece had returned to normalcy.

But the rise in Italian bond yields has rippled through into Greek markets, pushing the Greek 10-year yield well above 4 per cent, double that of Portugal, to what Athens bankers called “impossible rates”.

Wednesday, November 21, 2018

The Greek central bank will on Thursday unveil its plan for slashing the large pile of non-performing loans clogging up the balance sheets of the country’s banks in an effort to help them resume normal lending.

The proposal calls for Greece’s five largest banks to transfer up to €7.5bn of deferred tax assets to a special purpose vehicle, which would then issue bonds and use the proceeds to acquire about €42bn of non-performing loans (NPLs) held by the banks.

“This transaction would help restore confidence in the Greek banking system by cutting the bad debt portfolio in half,” said Spyros Pantelias, the head financial stability at the country’s central bank, who devised the scheme.

“It would also give the Greek banks full access to the capital markets and allow them to channel fresh capital into the economy,” he added.

Wednesday, November 14, 2018

Greek civil servants staged a 24-hour strike on Wednesday to press for wage and pensions increases that would reverse deep cuts in incomes enacted during the country’s three international bailouts since 2010.

Construction workers and employees of the state electricity utility also joined the walkout, the first large-scale union action since Athens exited its most recent rescue programme in August.

The strike came days after Alexis Tsipras, the leftwing prime minister, pledged to add more than 35,000 new civil service jobs over the next three years, rolling back tight restrictions on hiring imposed by Greece’s creditors during eight years of austerity.

In an unexpected move that caused uproar among church authorities, the premier also announced a plan to shift 9,000 Orthodox priests off the state payroll to make room for a similar number of new civil service appointments, without first having consulted the synod of Greek bishops.

Thursday, November 8, 2018

The down-at-heel neighbourhood of Exarchia in central Athens, known for its lively bars and tavernas, has long been home to a small but disruptive community of self-described anarchists. Violent street battles take place at weekends: extremists throw Molotov cocktails at police, who respond with tear gas. Long-suffering residents say their complaints are routinely ignored by the authorities.

One anarchist group, Rouvikonas (Rubicon), uses more sophisticated tactics to make its presence felt. Based in a cinema-cum-bar close to Exarchia’s central square, populated with drug pushers and sellers of bootleg cigarettes, Rouvikonas stages nuisance attacks against embassies, government buildings and the offices of multinational companies. Its members are not usually arrested. Prosecutors dismiss their actions as “too insignificant” to justify full-fledged investigation.

Wednesday, October 31, 2018

The EU is a bully. The EU is inflexible and unjust. Our proud nation must no longer submit to the diktats of Brussels and its accomplices. These complaints of Brexiters in the UK resemble the indignation of some Greeks about their nation’s treatment during the eurozone’s sovereign debt and financial sector crises.

The British government and people, still unable to settle on a definition of Brexit, can learn from Greece’s long, painful struggle. Some lessons offer grounds for hope. It turns out that a democratic political system and society can emerge, bruised but fundamentally intact, from the most severe of peacetime challenges. Other lessons, showing how an oddball nation on the edge of Europe can rediscover a constructive role for itself, may be less musical to Brexiters’ ears.

Greece’s agony began in the closing months of 2009 when the newly elected government of George Papandreou, the centre-left prime minister, uncovered the terrible truth about the nation’s imploding public finances. In 2010 there began eight years of emergency bailouts, led by the EU and the IMF, and the transformation of Greece into a de facto protectorate of its creditors. The bailout era ended in August, but a surveillance regime is in place that requires strict adherence to fiscal discipline, ­economic reform and administrative overhaul in return for the creditors’ ­support.

Monday, October 29, 2018

A
stand-off between nationalists and leftwingers in Greece’s fragile
coalition government is undermining prospects for settling a
three-decade-long dispute over Macedonia’s name, which has blocked the
Balkan country’s path towards membership of Nato and the EU.

The
leftwing Syriza party of prime minister Alexis Tsipras strongly
supports a deal signed with Skopje in June, which removes Athens’
concern that the term Macedonia implies a territorial claim on the Greek
region of the same name.

But Syriza’s coalition
partner, the rightwing Independent Greeks, has threatened to pull out of
government over the Prespa agreement, named after the Balkan lake where
it was signed.

Panos Kammenos, the outspoken defence
minister and the party’s leader, said last week: “‘North Macedonia’ [the
country’s proposed new name] for us is the last straw.”

“We will not accept the term Macedonia, we will walk out of parliament if Syriza presents the agreement [for ratification].”

Thursday, October 25, 2018

Modern Greece has a history of almost two centuries. During these centuries, the country managed to move from the backwaters of Europe to a prosperous liberal democracy before economic crisis hit the country hard in 2010. Greece was founded after a War of Independence from the Ottoman Empire that was based on liberal and democratic principles. This left a political legacy which led to universal male suffrage as early as 1844 and one of the longest parliamentary histories in Europe, despite the tumultuous political life and brief periods of authoritarian regimes. The 19th century was a period of a slow modernization of the country (in infrastructure and institutions) but is was also suffocated by “Megali Idea”, the irredentist dream of the enlargement of the Greek state to include all lands, under Ottoman rule, inhabited by large Greek-speaking populations. A great part of Megali Idea was realized in early 20th century but the triumphs ended with a devastating catastrophe in 1922. Greek political elites were often incompetent and corrupt, but several reformist statesmen managed gradually to achieve convergence with other western European countries. Most importantly, they were very effective in steering Greece on the right (i.e. winning) side of history during every major European or Global conflict (Balkan Wars, World Wars, Cold War). Greece, after World War II and a ferocious Civil War, enjoyed one of the strongest, almost uninterrupted growth on a global level. This led to the accession to the European Communities in 1981 and later the Eurozone. Today, after ten years of economic crisis and painful austerity, Greece must meet one of the most difficult challenges: to achieve growth by adopting inclusive institutions.

Wednesday, October 17, 2018

The leader of New Democracy, currently Greece’s main opposition party -- who will become prime minister if his party wins general elections next year -- says what the country needs more than anything else is investment. With that in mind, he says he will issue permits for the mining project in Skouries, northern Greece, in his very first month in office and push for the development of the site of the former Athens Airport of Hellinikon.

The top priority would be to “unblock important and symbolic investment projects” the 50-year-old said in an interview in his spacious, bright office on a busy Athens street. “One way or another, Hellinikon must get off the ground in 2019. This project must not be delayed, not even for a minute longer. Hellinikon is the most emblematic of the big investments in the country. It’s all about the new Athens.”

The projects are together valued at about 11 billion euros ($12.7 billion) and have been stalled for years in legal and bureaucratic red tape in Greece, where luring investments has become critical to reviving an economy that lost about 25 percent of its gross domestic product during its almost decade-long crisis.

Months after exiting its international rescue program, the country faces renewed trouble in its banking system. There is no easy fix: money is short and investor patience thin. But it looks increasingly like the gradual approach pursued by Athens and the euro zone authorities is running out of steam.

Lenders still bear the scars of a decade of economic crisis. Borrowers are failing to meet payments on almost half of all loans, the highest ratio in the euro zone. A large proportion of banks’ capital is made of so-called “deferred tax assets” – future tax deductions accrued because of past losses – about which investors are skeptical.

True, there are differences in the health of the four largest lenders: Piraeus Bank SA is in the worst shape, while National Bank of Greece SA and Eurobank Ergasias SA are faring much better. But investors have little time for such subtleties: the country’s banking stocks have trailed their European equivalents by 32 percent this year. Even Eurobank trades at an unhealthy 77 percent discount to the book value of its assets.

Friday, October 5, 2018

Burdened by the highest ratio of bad loans in Europe, Greek banks have no shortage of challenges. And that was before Greece -- the continent’s most indebted state -- decided to end its bailout program in August without requesting a follow-up lifeline backed by European creditors. If doubts about the state of their balance sheets aren’t addressed, concerns about the fate of Greek banks could spiral out of control. That became clear this week when banking shares plunged, though news that the government is weighing plans to help lenders speed up bad-loan disposals arrested the declines.

1. Didn’t the world already fix Greece?

It’s tried. This summer Greece graduated from its third international rescue program and reached a landmark deal with Europe’s other governments that gives it a decade or more to start repaying most of its loans (with the understanding it won’t go back to the spending that brought its economy to the brink of collapse in 2009). The nation’s largest banks have been recapitalized three times since the start of the debt crisis -- most recently in 2015. The state, which has chipped in almost 50 billion euros to shore up capital over the past decade, says its banks are now well-capitalized and poised to gain from a nascent economic rebound. It also says that the banks have now new tools at their disposal to resolve the bad loans issue, including easier out-of-court settlement procedures and e-auctions.

Wednesday, October 3, 2018

Greek bank stocks reeled amid growing concerns about their need for more capital, even as the biggest lenders were said to set ambitious new targets for reducing their piles of bad debt.

The benchmark FTSE Athex banks index dropped almost 9 percent on Wednesday, after earlier in the day slipping as much as 18 percent. Piraeus Bank SA closed 21 percent lower, having slumped 30 percent to the lowest ever after Chief Executive Officer Christos Megalou told Reuters that the bank is looking for an opportunity to issue debt to boost capital. Bloomberg reported on Friday that the ECB told the lender to increase capital this year.

Piraeus must raise about 500 million euros ($577 million) by selling tier 2 bonds under a plan agreed with the ECB’s Single Supervisory Mechanism, two people with knowledge of the matter told Bloomberg. Traders say the recent deterioration in the European bond market amid political tensions between Italy and the European Union adds to worries about Piraeus’s recapitalization efforts.

The lender is monitoring debt capital markets to identify the right timing for the issuance of the bonds, according to an Athens bourse filing it issued Wednesday in response to press reports. The issuance “remains subject to market conditions,” Piraeus said.

Some of Greece’s biggest banks suffered steep share price falls on Wednesday as investors worried they may not have enough capital to meet fresh targets on reducing their large portfolios of bad debts.

Shares in Piraeus Bank, the country’s largest lender by assets, dropped more than 20 per cent, cutting its market capitalisation to less than €600m. The bank responded by trying to reassure investors that its plan to boost capital by issuing €500m of subordinated bonds was still on track.

Piraeus was the worst performer in the European Central Bank’s stress tests of Greek lenders in April. After its capital ratio fell lower than rivals in the stressed scenario, it agreed a plan with regulators to raise €1bn of capital by issuing bonds and selling operations in central and eastern Europe.

Fears exist that Piraeus could find it hard to complete its planned bond issue because of general market jitters stemming from concern over the Italian government’s budget deficit plans and the fragility of emerging markets.

Sunday, September 30, 2018

Greek politicians are gambling their post-bailout credibility with lenders and investors on voter-pleasing promises as they look to elections that may be just months away.

Prime Minister Alexis Tsipras has pitched rescinding unpopular pension cuts slated for January, while both he and opposition leader Kyriakos Mitsotakis are promising lower taxes. The government will unveil draft numbers on Monday, and the plan is the first big test of how much fiscal sovereignty Greece has regained since exiting its aid program in August.

Tsipras says he can hit fiscal targets set down by the euro area and International Monetary Fund without the planned pension cuts. They were agreed after months of back and forth negotiations, and some creditors consider them a vital structural reform. That means the government risks creating the impression of backsliding now that Greece is out of the bailout.

Thursday, September 27, 2018

Greece’s Prime Minister Alexis Tsipras vowed to ratify a landmark pact with neighboring Macedonia regardless of domestic political risks, as part of a strategy to stabilize the Balkan region in cooperation with the U.S. and European Union.

Macedonians are expected to back the agreement with Mr. Tsipras’s government to rename itself “North Macedonia” in a referendum on Sunday.

In return, Greece, which has long objected to its neighbor using “Macedonia”—a name that dates back to the ancient Greek kingdom of Alexander the Great—has promised to lift its veto on the small country joining the North Atlantic Treaty Organization and, eventually, the EU.

Greek nationalists, including a small party in Mr. Tsipras’s left-led coalition, object to the pact. A vote to ratify the deal in Greece’s parliament could therefore split the government, leading to speculation that Mr. Tsipras might postpone the emotionally charged decision until after Greek elections next year, which he is not expected to win. He dismissed that speculation.

Tuesday, September 25, 2018

The EU’s anti-fraud watchdog is investigating the potential misuse of EU funds meant to provide food for refugees in Greece, a spokesperson for the agency said Tuesday.

The news follows the detention on Saturday of three journalists from Greek newspaper Fileleftheros following a libel suit filed by the country’s defense minister about an article alleging mishandling of EU funds meant for reception centers for migrants.

A spokesperson for the European Anti-Fraud Agency (OLAF) declined to go into detail about the investigation or say whether it was related to the newspaper allegations.

The investigation into “alleged irregularities concerning the provision of EU-funded food for refugees in Greece” was launched following information submitted by the European Commission’s directorate-general for migration and home affairs in 2017, the spokesperson said.

“As the investigation is on-going, OLAF cannot issue any further comment at this stage,” the spokesperson said in an email, adding that “the fact that OLAF is examining the matter does not mean that any persons/entities involved have committed an irregularity/fraud.”

Monday, September 24, 2018

Most evenings at about 11pm, Hanan and Ismail Abbas take their four young children to play in a park near their apartment in central Athens. “Local families are out enjoying the cooler temperatures so we feel safe being out so late,” says Ismail, a 33-year-old footwear designer who fled to Greece last year from the Syrian city of Aleppo.

“We eat ice-cream and practise speaking Greek to our neighbours.”

Mr Abbas was granted refugee status after crossing from Turkey in a smuggler’s boat and spending two months in a camp on the island of Kos.

He was later able to bring his family to Athens and now has a job with a small Greek business exporting handmade shoes. He says: “I was lucky to find work in Athens, not only a house.”

The family lives in a middle-class neighbourhood in a flat rented by SolidarityNow, a Greek non-governmental organisation founded by George Soros, which is participating in a European Union-funded programme that aims to house up to 27,000 vulnerable refugees.

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About

This blog is dedicated to the understanding of the current Greek (but also European) economic, political and institutional crisis. It was created by Prof. Aristides Hatzis of the University of Athens, after many requests by his students who seek a source of reliable analysis on the Greek current affairs. Its aim is to post commentary and reports published mainly in the major U.S. and European media and to encourage a rigorous discussion.